Generally speaking, SPVs (Special Purpose Vehicles) are investment entities (commonly LLCs) formed for the purpose of making a single investment into a single startup.
- For example, let's say a fund has received a follow-on opportunity into a startup it previously invested into - however Fund A is not set up to do follow-on investments nor does it have the capital to do so.
- Fund A could set up an SPV and "syndicate" the follow-on opportunity, offering the SPV to its limited partners or others (depending on the circumstances). The SPV would collect the capital (after all legal setup and agreements have been completed) and then make the follow-on investment.
SPVs are also sometimes set up when an investor has received an allocation into a hot deal, but they are not able to make the the full allocation by themselves. Note that not all startups/companies are willing to accept investments via SPV, so be sure to check.